Top 20 Startup Ecosystems – Where is Ireland?

Can Ireland make it as a world-leading ecosystem for entrepreneurship and innovation? We would like to think so. Right?

However, according to Startup Genome, a collaborate research project helping startups to benchmark their progress, the answer is NO. This week they launched their report on the World’s Top 20 Startup Ecosystems. Ireland didn’t make it.

The World Startup Ecosystem Index

Here is the ranking of the top early-phase startup ecosystems, based on data compiled from 50,000 startups around the world, examining data such as “finances, team, product, sales, marketing, business model, market and demographic & psychographic information about the founder.”

The ranking is based on eight weighted components which are considered key to a healthy startup ecosystem, with Silicon Valley being the role model:

Startup Output Index: the total activity of entrepreneurship in the region.

Funding Index: how active and how comprehensive is the risk capital.

Company Performance Index: the total performance and performance potential of startups.

Mindset Index: how well the population of founders in a given ecosystem thinks like a great entrepreneur.

Trendsetter Index: how quickly a startup ecosystem adopts new technologies, management processes, and business models.

Support Index: the quality of the support network, including the prevalence of mentorship, service providers and types of funding sources.

Differentiation Index: how different a startup ecosystem is to Silicon Valley.

It seems that for none of these criteria, can Ireland claim to be world-beating.

Learning Lessons

Today, Ireland can look to the other world-leading startup ecosystems to learn which contributors are most important for the overall health of the ecosystem.

Silicon Valley, as the prototype, has 32% more capital available across all stages of development, 20% more mentors and 35% more serial entrepreneurs who are far more likely to commit to the start-up process being less likely to engage in on-the-side consulting activities. They work longer hours on average than entrepreneurs in other eco-systems and are more likely to to have a vision to change the world than just to build a new product.

While Silicon Valley might be the role model, the main competition for Ireland is closer than we might think. Dublin is in fact more likely to bleed investment dollars and talent to London, Paris or Berlin.

Berlin, for example, is being currently being hyped as an emerging startup ecosystem and there is lots to learn from how this city is developing. It is the home to such start-ups as Soundcloud, Gidsy, EyeEm, Amen and Readmill. It is also home to the controversial but immensely successful Samwer brothers of Rocket Internet who famously clone US internet ideas and then sell the business they develop back to their originators – CityDeal to Groupon, Alando to eBay etc.

Berlin is the European trendsetter right now, combining a creative mindset with technical and commercial know-how. The low cost of living is also making Berlin an attractive place for young cash-straped entrepreneurs to base themselves. The city is certainly doing something right as Google this week announced a €1 million investment in a new “hub” to support startups, further cementing the self-fulfilling hype.

Look East

While Ireland may not have made it into the top 20 in this particular report, Ireland does have a unique advantage that most other startup ecosystems must envy. Within Europe, Ireland can certainly claim to be the capital of foreign direct investment, mostly from US multi-nationals. In tech, bio and pharma, the largest global organisations are using Ireland as their launchpad to EMEA. As a result, there exists within Ireland a wealth of experience, both indigenous and imported, in highly specialised, high value sectors and international market management.

If the world’s largest companies are using Ireland as their base for their eastward growth, then Irish entrepreneurs should take a leaf out of their books. The individual European markets might individually be smaller than the US market, however the combined size of these markets is much greater, in particular the further east you progress. The massive Russian and Asian market are literally at our doorstep.

The Samwer brothers in Berlin learned this early by developing local market versions of US ventures, realising that State-side companies come late to the European market. Thus they identify successful innovations and replicate them capturing critical market share in Europe. I’m not advocating cloning. Rather a focus on developing strong localisation capabilities and exploitation of the markets that lie to the east, rather than an obsession with looking west to the US as the big prize.

My own company, coincidently with German founders, remains strongest in its initial venture through the cumulative successes of the various European markets rather than the Anglo market. It is therefore no surprise that our latest venture launches simultaneously in Russian, German and English.

Short & Mid-term Priorities

Meanwhile, Ireland Inc. should certainly maintain the momentum on the continued deployment of broadband. The goal should be that every business, school and home should have fibre access – not just the lucky few. We should start to consider nationwide high speed broadband networks to be an essential natural resource; a priority that requires high level attention from government. It has been described as “the rural electrification of the 21st century” and it certainly should be considered in these terms.

There should be increased governmental structural support for key clusters with major growth potential, such as digital content (games, gaming, animation, e-learning), big data and analytics cloud computing, medical technologies, food nutrition etc. Examples of such support include friendly regulatory environment; reliable IP ownership protection; tax incentives for specific types of business, R&D expenditure, startup investments or patent income; access to finance in the form of innovation funds; development and attraction of key skills such as easy access to work permits, attractiveness for high-net worth individual investors and reducing the overall cost of living etc.

There needs to be strong focus on developing management skills for international trade such as how to manage a multi-country business. Every third-level science, technology and business course should have an international business module – if you can’t trade internationally you can’t grow out of Ireland. The multi-nationals in Ireland are bar none export-focused and so we can be sure that the core skills already exist on the island.

There can be closer collaboration between industry and the education sector. More researchers and higher-ed students need to get out into industry – in my current role I rarely interview a German graduate who has not already participated in at least 3 internships. It should also be a condition for the multi-nationals receiving state aid that they positively contribute not just to employment numbers but to the development of a lasting “skills infrastructure”. Facebook actively engages with the local developer community is a good example of this in practice.

There needs to be increased focus on science and technology in schools – why do kids still take big bags to school everyday, when they are the most tech-savy part of our population. Tech should just be second nature in everything we do from the earliest age and certainly should be integrated into all aspects of learning throughout the school curriculum.

Ireland needs to establish its reputation as a credible place for startups and entrepreneurs to base themselves. The f.ounders initiative, bringing together leading tech entrepreneurs from around the globe, is a great industry-led initiative for bringing the spotlight to the vibrant startup ecosystem that does in fact exist in Ireland. Perhaps the authors of the above report will also take note, before they prepare next year’s report.